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Regional Director of Employees' State Insurance Corporation Vs. Management of Mysore Kirloskar Ltd. (14.11.1973 - KARHC) - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKarnataka High Court
Decided On
Judge
Reported in(1974)IILLJ396Kant
AppellantRegional Director of Employees' State Insurance Corporation
RespondentManagement of Mysore Kirloskar Ltd.
Excerpt:
- income tax act,1961[c.a.no.43/1961] -- sections 158-ba & 143: [v.gopala gowda & arali nagaraj, jj] assessment same income which was assessed as undisclosed income for block period in block assessment - held, the assessment of undisclosed income relating to block period shall have to be made only in accordance with the provisions of chapter xiv-b of income-tax act, 1961; which provide special procedure for such assessment and that the total undisclosed income relating to the block period which is assessed under the said chapter shall not be included in the regular assessment of any previous year included in the block period. hence, the same income which was assessed as the undisclosed income for the block period could not be assessed even on protective basis. .....company') and declaring that the incentive payments made by the company to its employees under the incentive scheme are not 'wages' as defined under the act and that esi contributions are not to be levied on such payments.2. esi scheme was applied to the different units of the company in different years. the company has been collecting the contributions from its employees on the wages payable under the terms of employment and crediting the same to the esi corporation together with the employer's contribution. disputes arose between the corporation and the company on the company making contributions on the incentive payment also, the the incentive bonus paid to its employees with effect from 1-11-1971. since the appellant overruled the objections of the company and insisted on the company.....
Judgment:

Govinda Bhat, C.J.

1. This is an appeal under Section 82(2) of the Employees' State Insurance Act, 1948 (hereinafter called ''the Act', by the Regional Director, Employees' State Insurance Corporation, Bangalore, against the order of the Employees' State Insurance Court, Harihar at Bangalore dated 19-2-1973 made in ESIA-3 of 72, allowing the application of the Mysore Kirloskar Ltd. respondent (hereinafter called 'the company') and declaring that the incentive payments made by the company to its employees under the incentive scheme are not 'wages' as defined under the Act and that ESI contributions are not to be levied on such payments.

2. ESI Scheme was applied to the different units of the company in different years. The company has been collecting the contributions from its employees on the wages payable under the terms of employment and crediting the same to the ESI Corporation together with the employer's contribution. Disputes arose between the Corporation and the company on the company making contributions on the incentive payment also, the the incentive bonus paid to its employees with effect from 1-11-1971. Since the appellant overruled the objections of the company and insisted on the company making contributions on the incentive payment also, the company filed an application before the Employees' Insurance Court at Harihar, for a declaration to the effect that payments made as incentive payments by the applicant-company on its own voluntary scheme cannot be considered as wages and that no ESI contribution is payable either by the employer or by the employees.

3. The appellant contested the said application and contended that the incentive payments come within the definition of the word 'wages' contained in Section 2(22) of the Act.

4. The learned Presiding Judge of the E.S.I. Court relying on conditions 8 and 9 of the incentive scheme (copy of which is marked as Ext. A19 came to the conclusion that the employees would be entitled to the incentive payment if their production goes up above a minimum target and the employer has a right to withdraw the Scheme or revise its conditions. Therefore, the learned Judge held that the incentive payment paid by the employer was not in pursuance of the terms of employment, express or implied, and consequently the said payment cannot be termed as ''wages' under the Act,

5. Sri Ranganna, learned Counsel for the appellant conceded before us that the incentive payments nude by the company in the instant case is in no way different from the payments made under the inam scheme by M/s. Braithwaite and Co. (India) Ltd. which came up for decision before the Supreme Court in Braithwaite and Co. v. E.S.I. Corporation : (1968)ILLJ550SC . But the learned Counsel argued that what the Supreme Court decided in Braithwaite's case : (1968)ILLJ550SC , was that payments under the inams scheme did not fall within the first part of the definition of the word 'wages' in Section 2(22) of the Act and that the Supreme Court has expressly stated that they have confined their decision to the interpretation of the first part of the definition of the term 'wages'. While conceding that the incentive payments under the incentive scheme in the instance case does not fall within the first part of the definition of the term 'wages' the learned Counsel urged that the payments fall within the second part of the definition, viz., 'other additional remuneration, if any, paid at intervals not exceeding two months'.

6. The term 'wages' has been defined thus in Section 2(27) of the Act:

'Wages' means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include-(The second part of the definition relied on by the learned Counsel for the appellant has been underlined (italics) by us)

7. In our opinion, the argument of the learned Counsel for the appellant cannot be accepted for two reasons. In Braithwaite's case (supra) the company had made an application before the Employees' Insurance Court for a declaration that the inam paid or to be paid to its workmen under the inam scheme initiated on 28-12-1955 is not wages as defined under the Act and that no contribution was payable by the company in respect thereof. That declaration was granted by the Employees' Insurance Court On appeal by the Corporation, the High Court of Calcutta reversed the decision of the lower Court and held that inam was wages. Braithwaite & Co. thereupon preferred an appeal to the Supreme Court. The Supreme Court allowed the said appeal, set aside the order of the High Court and restored the order made by the Employees' Insurance Court. The result is that the Supreme Court has made a declaration that the inam paid or to be paid under the inam scheme is not 'wages' as defined under the Act. The declaration made by the Supreme Court is not merely that the inam paid under the said scheme is not wages within the first part of the definition of the word 'wages' but that the inam paid is not 'wages' as defined in Section 2(22) of the Act. If this Court, accepting the argument of the learned Counsel for the appellant were to hold that payments of the same character as were concerned in Braithwaite's case (supra), are wages as defined in Section 2(22) of the Act, we would be disregarding the law as laid down by the Supreme Court. It was open to the Corporation to urge before the Supreme Court in Braithwaite's case (supra) that the second part of the definition, viz., other additional remuneration, is not of the same nature as the remuneration defined in the first part of the definition and that the inam under the scheme is also 'wages' as defined under the Act. Such an argument was advisedly not pressed. The issue for decision before the Supreme Court was whether the inam under the inam scheme was not a term of contract of employment, express or implied, and whether the said payment constituted 'wages' as defined in Section 2(22) of the Act. The decision was that such payment is not 'wages' as defined in Section 2(22) of the Act. When there is a decision of the Supreme Court to the effect that payments in inam made by an employer to his employees which does not form a term of contract of employment, express or implied, is not 'wages' as defined in Section 2(22) of the Act, it is not open to any High Court to take a contrary view on the ground that before the Supreme Court reliance was not placed on the second part of the definition.

8. According to the decision in Braithwaite's case (supra) the first part of word 'wages' included remuneration paid under the terms of the contract of employment, express or implied, but not voluntary payment by the employer which can be withdrawn or varied at his will and pleasure. The second part of the definition, in our opinion, merely takes in additional remuneration of the same nature as remuneration falling under the first part. In other words, the additional remuneration contemplated is also remuneration payable under the terms of employment, express or implied. That seems to be the intention of the Legislature is char from the definition of the word 'wages' in Section 2(vi) of the Payment of Wages Act, 1936, where the definition is almost similar. It is useful to set out the relevant portion of the said definition of the Payment of Wages Act.

(vi) 'Wages' means all remuneration (whether by way of salary, allowance's or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to person employed in respect of his employment or of work done in such employment, and includes-

(a) any remuneration payable under any award or settlement between the parties or order of a Court;

(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;

(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name)...

9. This view of ours also finds support from the decision of the Calcutta High Court in Bengal Potteries v. E.S.I. Corporation (1973) Lab I.C. Cal. 1328. In the said case the questions were whether payment of incentive bonus paid was not as a part of the term of employment; whether the employer reserved the right to modify the bonus scheme; and whether the payments made under the Scheme came within the definition of the word 'wages' under Section 2(22) of the Act. It was urged in the said case on behalf of the E.S.T. Corporation that incentive bonus paid or payable came within the second part of the definition. That argument was rejected by Sabyasachi Mukhcrji, J. and it was held that the incentive bonus paid under the Scheme in the said case cannot be regarded as ''wages' under Section 2(22) of the Act.

10. For the reasons stated above, we dismiss the appeal with costs and affirm the order of the Employees' State Insurance Court.


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